[Federal Register Volume 70, Number 79 (Tuesday, April 26, 2005)]
[Notices]
[Pages 21480-21481]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1974]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51579; File No. SR-FICC-2005-08]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Expand the Types of Securities Eligible for FICC's GCF Repo Service to
Include Treasury-Inflation Protected Securities
April 20, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 8, 2005, The Fixed
Income Clearing Corporation (``FICC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change described
in Items I, II, and III below, which items have been prepared primarily
by FICC. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FICC is seeking to amend the rules of its Government Securities
Division (``GSD'') to expand the types of securities eligible for the
GCF Repo service to include Treasury Inflation-Protected Securities
(``TIPS''), a Treasury security whose principal amount is adjusted for
inflation.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FICC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FICC has prepared summaries, set forth in Sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\2\
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\2\ The Commission has modified the text of the summaries
prepared by FICC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The GCF Repo service is a significant alternative financing vehicle
to the delivery versus payment and tri-party repo markets. Currently,
most Treasury securities, non-mortgage-backed agency securities, and
fixed and adjustable rate mortgage-backed securities are eligible for
this service.\3\ FICC is expanding its rules to also make eligible
TIPS.
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\3\ Securities Exchange Act Release Nos. 40623 (October 30,
1998), 63 FR 59831 (November 5, 1998) [File No. SR-GSCC-98-02] and
42996 (June 30, 2000), 65 FR 42740 [File No. SR-GSCC-00-04].
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When the GCF Repo service was implemented, TIPS were not generally
accepted as collateral in tri-party repo arrangements and therefore
were not included in the service. Since then, TIPS have gained
considerable acceptance in the marketplace for tri-party and other
trading practices. TIPS are currently netting eligible for the GSD's
delivery versus payment service, and FICC has received requests from
members to make TIPS eligible for the GCF Repo service. FICC has
received an endorsement from the Funding Practices Committee of The
Bond Market Association with respect to this proposal.\4\
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\4\ FICC has obtained the Generic CUSIP Number necessary for the
inclusion of TIPS as a ``GCF Repo Security'' on its master file of
eligible securities. Upon effectiveness of this proposal, FICC will
effectuate the proposed change by listing this Generic CUSIP Number
on the master file. The date of such listing will be announced to
members by Important Notice.
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TIPS, which are issued in terms of 5, 10, and 20 years, have the
same basic characteristics of other Treasury securities and are
generally considered to be of the same low risk level.\5\ FICC has
determined that with respect to its risk management processes, TIPS
would be subject to the same maturity ranges, offset classes, margin
rates, and disallowance factors as are other Treasury securities.\6\
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\5\ TIPS are issued through the auction process, are direct
obligations of the U.S. government, and are backed by its full faith
and credit.
\6\ As such, references to ``GCF Treasury Securities'' or ``GCF
Treasuries'' in the Margin Factor and Offset Class Schedules and
Disallowance Percentage Schedules that are annexed to the GSD Rules
will include TIPS upon effectiveness of this filing.
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For purposes of GSD Rule 20 (Special Provisions for GCF Repo
Transactions), general references to U.S. Treasury bills, notes, or
bonds do not include TIPS.\7\ Therefore, TIPS could not be used within
the GCF Repo service to satisfy obligations to post or return any other
type of collateral.\8\
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\7\ The proposed rule change also amends GSD's Rule 20 to make
clear that reference to ``U.S. Treasury bills, notes or bonds''
therein shall not include Treasury Inflation-Protected Securities.
\8\ However, as is consistent with the existing GCF Repo
provisions, U.S. Treasury bills, notes, or bonds (or cash) may
generally be used to satisfy obligations to post or return other
collateral types and therefore could be used to satisfy any such
obligations involving TIPS.
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FICC believes the proposed rule change is consistent with the
requirements of Section 17A of the Act \9\ and the rules and
regulations thereunder applicable to FICC because it allows FICC to
expand an important service that provides members with a continuing
ability to engage in general collateral trading activity in a safe and
efficient manner. As such, the proposed rule facilitates the prompt and
accurate clearance and settlement of securities transactions and
assures the safeguarding of securities and funds which are in the
custody or control of FICC or for which it is responsible.
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\9\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
FICC does not believe that the proposed rule change will have an
impact or impose any burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments were not solicited or received. FICC will notify
the Commission of any written comments received by FICC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A) of the Act\10\ and Rule 19b-4(f)(4) \11\
thereunder because the proposed rule does not significantly affect the
respective rights or obligations of the clearing agency or persons
using the service and does not adversely affect the safeguarding of
securities or funds in the custody or control of FICC or for which it
is responsible. The rule change will be implemented on the date FICC
lists the Generic CUSIP number for TIPS as a ``GCF Repo Security'' on
its master file of eligible securities, which date will be announced to
members by
[[Page 21481]]
Important Notice. At any time within sixty days of the filing of the
proposed rule change, the Commission may summarily abrogate the rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(4).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-FICC-2005-08 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-FICC-2005-08. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Section, 450 Fifth
Street, NW., Washington, DC 20549. Copies of such filings also will be
available for inspection and copying at the principal office of FICC
and on FICC's Web site at http://www.ficc.com. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-FICC-2005-08 and should be submitted on
or before May 17, 2005.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1974 Filed 4-25-05; 8:45 am]
BILLING CODE 8010-01-P